Insurance Inquiries Advance

States Prepares More Subpoenas

Talks About Disclosing Commissions Slated

Connecticut officials, concerned about alleged bid-rigging and other abuses in insurance, are issuing more subpoenas this week and getting the industry's advice about improving disclosure of commissions.

Attorney General Richard Blumenthal, whose office already subpoenaed 34 firms, said Monday that subpoenas are going out this week to an undetermined number of additional insurance companies and brokers. He would not name them.

Blumenthal released a list of the original 34 companies in response to The Courant's request under state Freedom of Information law. (See list at bottom of story.) The subpoenas ask about bonus commission payments and whether companies provided bogus bids in any bid-rigging or price-fixing schemes.

Connecticut's activity is part of the snowballing spinoffs from an investigation by New York Attorney General Eliot Spitzer into insurance bid-rigging. He has sued broker Marsh, implicated several insurers, arrested three insurance executives and promised action against more individuals and companies.

``This kind of national problem really cries out for leadership and involvement by more than one state,'' Blumenthal said Monday.

The list of companies Blumenthal has subpoenaed includes many insurers and brokers who are among the largest players in the industry and have also acknowledged receiving Spitzer subpoenas.

``Our initial focus is on businesses that have larger size and scope because the impact of the problem is likely to be bigger if they're involved in illegal practices,'' Blumenthal said in an interview Monday.

The subpoenas -- requests for documents and information -- do not allege that a company has done something wrong.

But, Blumenthal said, ``The size and scope of these companies suggested a higher potential for involvement in contingent commission practices or other payments that might lead to bid rigging or price-fixing.''

Insurers often pay bonus, or ``contingent'' commissions, based on the volume of a broker's business with the company, the profitability of that business, or both. Spitzer and others have said the bonuses encourage brokers, seeking the highest possible bonuses, to steer customers to insurance that might have cost them more than it should have.

Many of the companies on Blumenthal's subpoena list had already said they would comply and that they do not believe they did anything illegal.

On Monday, R.C. Knox & Co., one of Connecticut's largest insurance agencies, acknowledged it received a Blumenthal subpoena.

``We wish to make it clear that it has never been Knox's policy to submit or ask for fictitious, inflated or sham bids and, to the best of our knowledge, this practice has never occurred at the company," said Valerie C. Carlson, a spokeswoman for People's Bank, which owns Knox.

Carlson said Knox has ``a number of contingent commission agreements with insurance carriers'' that are common and legal, but she declined to name them or discuss the terms.

Knox receives the extra commissions based on the volume of business it writes for an insurer and the claims experience of those insured, Carlson said in her prepared statement.

The Connecticut subpoena list includes Marsh -- Spitzer's first broker target -- and Universal Life Resources, a California broker that has been sued in private class actions, along with Aetna, CIGNA and other insurers.

The list also encompasses insurers such as Allstate and State Farm that sell mainly personal auto and homeowner insurance through their own salespeople or agents, not through independent brokers, where contingent commissions come into play.

Blumenthal would not comment about why he subpoenaed certain companies and not others. However, investigators often cast a wide net, sometimes seeking information from a company because it might have evidence of wrongdoing by a competitor.

Blumenthal says Connecticut is doing its own investigation because insurance is regulated by states, and each state ``has an obligation to ensure not only the integrity of its insurance operations, but also enforcement of its antitrust laws.''

Also, it's unclear whether Connecticut could get money from any settlement negotiated by Spitzer in New York.

``The consequences of a settlement in any legal action for the consumers of another state are problematic and speculative,'' Blumenthal said.

``So we're taking a very proactive and aggressive approach to ensure that our consumers and businesses are protected and compensated for damage done to them'' by the alleged illegal behavior.